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What is an Asset Progression Plan?

Do you want to spend more time with your children?

Have you ever thought about leaving a legacy behind for them?

Are you looking for a passive income that can fund your family expenses?

If you are looking for a quick and surest way to make money, stop reading because this article is not for you. This article is about 10 mins long. But the plan will take years to materialise.

Asset Progression Plan

An asset progression plan is a plan to enhance the value of your net worth.

It is a long term plan that one has to follow very closely. It involves meticulous calculations and guidance.

Like all investments, the earlier you start, the more time it has to grow in value.

Why do I even need to start an asset progression plan?

  1. I have a nice house, which I am paying using CPF.
  2. I have an emergency fund.
  3. I spend within my means.

Yes, it is great that you are responsible with your money. The problem is that most of us are paying for our house using our CPF. CPF is meant for retirement and is one of our first investment vehicles.

We are actually one of the few countries, which allow its citizens to buy a house using our retirement account. And this may be one of the reasons why our houses are ridiculously priced.

Secondly, because we are allowed to use our CPF, we will need to “pay back” the accrued interest when we sell our house. Accrued interest is the amount of interest the account could have made if we do not use it.

Thirdly, it is found that many Singaporeans are actually inadequately prepared for retirement. This is because most of our net worth is actually tied to our home value. The outdated plan is to buy a big house by utilising the maximum CPF, stay in the house for 30 years, then downgrade. The plan used to work a long time ago. We see housing prices data from 1975 till 2019 increased from 8.90 to 152.2 Index Points. A 1600% increase!

How many times have you heard your parents say they bought their house at $25,000 and now it’s valued at $400,000? If growth is going at the same rate as before, your $400,000 HDB should cost $6,400,000!

Do you think the prices will rise at the same rate in 30 years time?

I am not sure that the Government would want that to happen to our public housing.

Accrued Interest Can Snowball To A Huge Amount Over Time

Let’s take a $500,000 resale flat as an example.

  • 10% for downpayment = $50,000
  • Stamp duty = $9,600
  • Mortgage duty = $500
  • Legal fees $3000
  • Total CPF used for initial payment = $63,100
  • Instalment for 25 years = $2,040/month or $24,480/year

Over time, if we continue paying for our flats until the end of the loan tenure of 25 years, we would have used $951,132.45 from our CPF OA account and will have to refund it when we sell our property. Of this, close to $299,210.77 will be accrued interest! Our initial plan to buy a property worth $500,000 has now ballooned to $951,132.45

End of YearAmount We Have To Refund To CPF OAEstimated Accrued Interest In YearEstimated Total Accrued Interest

Will your HDB flats cost more than a million dollars in 25 years time??
Do you think your children can afford a million-dollar flat when they get married?
What will the Government do to stop this from happening?
Even if you get to sell at a million dollars, how much cash proceeds will you receive?

HDB is meant for public housing and it is in the interest of the Government to keep it affordable for everyone. Secondly, there are restrictions such as ethnic integration quota and currently, only Singaporeans and Permanent Residents can buy a resale HDB. These factors limit the number of buyers. When there is a lack of buyers (demand), prices will be pushed down.

Instead of having an investment vehicle to work for us, we are required to pay for using it. We think that CPF is money that we cannot “touch”, hence, we should maximise the usage as much as possible. Instead, we will get a rude shock, when we sell our house and find that most of our cash sales proceed will go back to our CPF. There are so many cases out there already where people are selling their houses without cash proceed or negative sales.

I don’t plan to sell my house yet.

The price is not right for me to sell.

Yes, you may think the price might not be right for you to sell. But the problem lies in the accrued interest. Every year you hold on to your property, the lesser amount of cash proceeds you will get. If you are serious about starting the asset progression journey, there is no time to lose.

Not only that, the older the flat becomes, the harder it will be for you to sell it.


This is because there is a restriction to the maximum CPF amount and the HDB loan. The property remaining lease must cover the youngest buyers’ till the age of 95. CPF savings and HDB loans will not be granted to fund the purchase of flats with 20 years or less left on the lease.

In short, the older your flat, the less appealing it is for CPF members to buy because they can’t use their CPF to buy in full. They also cannot get a 90% HDB loan, which means they will have to fork out 10% of the mortgage in cash.

For example, a 25-year-old buyer can only get 72% of the HDB loan and can only utilise 80% of their CPF for a 39-year-old flat.

So what should I do now?

I want you to be successful in building up assets that do not take away cash from you. If you have the means, you can choose to pay your monthly instalment using cash instead of CPF. By doing so, you will not incur any accrued interest.

Rule Number 1 to remember: CPF is there for your retirement.

If you are going to use it, use it STRATEGICALLY.

1. Transfer to CPF Special Account

You can transfer your CPF Ordinary account to the CPF Special Account instead. This method will allow you to earn 4% compounding interest.

Let’s use an example that we had used previously. Instead of paying the house, $2,040 monthly, we transfer the monthly instalment of $2,040 into the Special Account for 25 years. After 25 years, you would have contributed $612,000 into your account and your special account would already have $1,060,271.51! The downside of this plan is that you will need to wait until you turn 55. Secondly, the plan does not include a place for you and your family to stay in.

No. of yearsTotal deposit for the yearAmount at the end of the year

2. Buying Stocks

This is one of financial consultants’ favourite advice to people. Buy stocks and hold for the long term.

“Consistently buy an S&P 500 low-cost index fund” – Warren Buffet

Yes, I totally agree with Warren Buffet’s statement. However, S&P index fund is based in the US. There are a few problems with this plan:

  • There is a currency market risk as the domination is in US dollars. If the US dollars falls against the SG dollars, your investment will be affected.
  • As Singaporeans, we are subjected to U.S. tax withholding on U.S. dividends and certain other U.S. passive income. The default tax rate is 30%. Imagine your dividend being cut by 1/3.
  • You will need a lot of cash to see a sizeable profit as the banks would not lend you money without any proof that you are competent enough. Even so, the banks will charge a high-interest rate. To top it all off, your portfolio will be closely monitored to prevent losses.

You can use your CPF to buy an investment plan. For a list of investment instruments, you can visit the CPF website.

If you are using your Ordinary Account, you have to open a CPF Investment Account at one of the three CPFIS agent banks in Singapore. They are DBSOCBC, and UOB.  It does not matter which bank you choose as the commission rates are all the same.

Do note also you will need at least $20,000 in your Ordinary Account and $40,000 in your Special Account.

Most funds in CPFIS are not the low-cost index funds that Warren Buffet was referring to. They are mutual funds and it is best you ask your financial advisor what the charges are like.

You can choose to invest in the two STI ETFs, which tracks the Singapore Stock Index, and are good substitutes to index funds. This fund tracks the top 30 companies in the Singapore stock market.

However, any profits made will still go back to your CPF after selling your stocks.

If you are not confident with investing, it is best that you just leave it in your Ordinary or Special account. The rates are 2.5% and 4% and they are risk-free.

3. Through Real Estate Investing

Why use real estate as an investment vehicle to increase net worth?

In one of my articles, I have highlighted some of the benefits of real estate investments.

To summarise, these are the benefits:

  • Easy to finance and power of leverage
  • Low-interest rate
  • High potential of returns/beat inflation rate

Banks consider homes as secure loans.

This is because the homebuyers will have to pledge their house to the bank as collateral.

In an event that the homeowner cannot pay, the bank can sell the house, using the income from the sale to clear the mortgage debt.

Housing loan rates are also one of the lowest because the banks and financial institutions deem them as safe.

Power of leveraging

Currently, we can borrow up to 90% of the property valuation price/purchase price, whichever is lower.

For example, you have $50,000 cash today. If you put in a savings account, with a fixed deposit rate of 2%, for 1 year, the initial amount will grow up to $51,000. Your net worth will grow by $1,000.

If you invest in property, with the same amount, you can borrow up to $450,000 with a property worth $500,000, with the same rate of return of 2%, your net worth will grow to $10,000.

Same starting cash but different outcome when using different investment strategy. Would you choose $1,000 or $10,000? That is the power of leveraging.

Furthermore, you will get the best of both worlds. An investment vehicle that gives you and your family a shelter. You will have an asset that allows you to cash out anytime, unlike the CPF in which you will have to wait until you are 55.

So many options to choose from

Now you have 3 options to choose from to increase your portfolio.

  1. Transfer to CPF Special Account
  2. Buy Stocks
  3. Buy property

Still remember the No. 1 rule?

If you going to use your CPF, better be strategic about it.

All 3 options are available for you. I have set the pros and cons of each of the investment vehicles. Every one of us needs a home. So we should make the best decision out of it. It can be a home and at the same time, be an investment vehicle.

Property Investing

So how does one get started on property investing?

I heard we need a lot of money.

From the very beginning. If you are thinking of getting a house and you stumble upon this article, you are in luck. Stop following the trend by booking a BTO just to “chope” your girlfriend/boyfriend. Or buy a resale because it is cheap without considering the age of the property. Every property (BTO, resale, executive condo, commercial, retail) all have different attributes and unique value. You will first need to plan accordingly on how to use these properties strategically.

Yes, you may need a lot of money if you don’t plan properly. There are grants out there that allow you to purchase your first home. Use these grants to your advantage.

For experienced homeowners

I might have made a mistake on my property purchase.

I’m already a second timer, can I also start?

It is ok to make a mistake and it may not be too late to remedy it. At least now, you are aware of the mistake. I want you to act on it and move forward. You are actually better off than the first-timer because you can take immediate action. The first-timers will need a few more years before they can make their next move.

The important point is, you must be aware of all the opportunities that are available to you. It is not too late to start somewhere. But you need to start now.

So what’s the next move?

You need to write down all these:

  • Your monthly household income
  • The amount of money you are willing to put aside to invest
  • Current assets available
  • Your aspirations
  • Timeline to make your dream a reality

If you are in the lower-income and want to buy a property, which property will you buy? If you command a high income, what will you consider? Your monthly income dictates the amount of loan and the housing grants you can receive. You have to understand all of them and how you can make the best out of them.

How much are you willing to sacrifice to make this a reality? This plan will take years to materialise. Are you willing to follow through with the plan?

Is that all?

Quality of the investments

The most important part of every investment is the quality of the investment.

The quality of investment is the most important aspect of any investment vehicle. As mentioned above, your Special Account can already make you a millionaire just by you transferring your CPF from ordinary account to special account for 25 years. Can you be certain that your current investment plan can make you a millionaire with $2,000 a month?

What if I can’t invest $2,000?

Average Singaporeans don’t invest $2,000 a month, let alone earn $2,000 a month. We have so many expenses such as our children’s school fees, food for the family, money for our parents and so much more.

De-mystify the ads

How about those ads that say we can own 2 properties without paying ABSD?

Or using none of our cash savings after selling our house? Is it fake news?

Not all the ads out there is fake news. Council of Estate Agencies (CEA) will be the first to be informed if they were. Yes, there are strategies to avoid paying extra taxes when buying an investment property. There are ways not to touch your savings. Again, different people have different investment portfolios, incomes and aspirations. This is where you need to find a consultant who can see the potential in your situation and advise accordingly. Find a consultant who understands the real estate business well and also the other investments vehicles. You need to find a consultant, who serves not sells.

Every Client is Different

Every client is different and there are different strategies to deploy. I have to understand first your aspirations, your deployable assets and your financial situation. Only then, I can advise you further.

*Do note that the asset progression plan is a plan contrary to the 5 Basic Checks. To follow the 5 Basic Checks, you should not use your retirement funds for housing.*

Andik Imran

Engage an agent who serves, not sells

ANDIK IMRAN | BSc Business
CEA Reg No: R061801F

9450 8732
PropNex Realty Pte Ltd

Leave a comment

  1. Returning of CPF + accrued interest is not just for HDB. It applies to all properties as long as CPF is used. It could be worse for leasehold condo buyers who bought the condos at high prices using CPF and later sell (at questionable price) and need to return the CPF + accrued interest too. There’s no guarantee condo price will keep on increasing and with the lease running out prices may drop too. There’re many other valid concerns.

    1. Yes you are right..
      As long as we use our CPF, there is accrued interest being “charged”.
      We need to be prudent in using the CPF.
      Also, we need to have a plan when using it.

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